Europe Financial Bond House: HSBC
Rising to the moment For rising to the challenge in a year of opportunity and optimisation for financial institution issuers, which called for smart execution, versatility and imagination across the capital stack, and for its leadership in strategic and inaugural transactions, HSBC is IFR’s Europe Financial Bond House of the Year.
Despite geopolitical risks and political uncertainties, and in contrast to the disruptions and market shocks of previous years, 2024 was for most FIG issuers a year of wide-open markets and historically low funding costs, with technical factors working in credit’s favour.
It was a year in which the breadth of HSBC’s franchise came to the fore, when the bank’s expertise across the euro, sterling and Reg S US dollar markets and its command of all asset classes from capital to covered bonds meant it was perfectly positioned. Its understanding of all types of issuer that make up the FIG universe enabled it to show real leadership.
One of the first and most influential trades of the year was a €1.5bn 6.375% perpetual non-call 10-year Restricted Tier 1 for AXA on January 9.
The bond, for which HSBC was a global coordinator, was long-awaited not just because it was AXA’s first issuance in the format, but also because it ended a drought of euro Restricted Tier 1 supply since September 2021.
After months of preparatory work, HSBC led AXA to a runaway success. Demand of more than €7.9bn allowed it to price the deal at 6.375%, 12.5bp–25bp inside estimates of fair value and inside bank Additional Tier 1s.
It was clear from the outset the deal would be “a big event” for the asset class and set the tone for Tier 1s more broadly, said Nik Dhanani, head of the global strategic solutions group. Its success put the RT1 market on course for its biggest year in terms of issuance volume.
HSBC was also global coordinator and structuring agent on the next two RT1s: for NN Group in another debut and ASR Nederland, and was a bookrunner for RT1s for Phoenix Group and Groupama (yet another debut) as issuers addressed rising refinancing needs.
Capital was a key theme of 2024, with AT1 supply hitting levels not seen since 2014 and Tier 2 supply undergoing a renaissance. Many of those capital trades highlighted another strength of HSBC: its platform and distribution capabilities allowed it to connect issuers to resurgent demand from Asian investors.
That was most notable in a series of Reg S US dollar trades. HSBC led AT1s from Commerzbank and ING, delivering multi-billion US dollar order books while the European market opening bell was practically still ringing thanks to strong Asian demand, setting both issuers on course for highly impressive pricing.
“I think most clients see us as the bank that can deliver Asia best,” said Christoph Hittmair, global head of FIG debt capital markets.
Asian investor engagement was also key to an unusual one-two from Rothesay. The UK insurer priced a £500m 10.5-year Tier 2 on June 3 and landed a Reg S US$325m 10.25-year non-call 5.25 Tier 2 on June 4, with HSBC a lead on both. The US dollar deal priced 20bp–30bp inside sterling.
HSBC’s global read enabled it time and again to deliver significant cost savings.
“Clients are often prepared to pay up to diversify, but we can deliver diversification savings ... reducing the requirement to pay up or to be visible in another core currency,” said Hugo Moore, head of frequent borrowers and covered bonds.
Crossing the Atlantic in the opposite direction, HSBC led Wells Fargo's €2.75bn two-part holdco senior featuring an FRN that priced as much as 17bp inside US dollars.
In the sterling market – which at times struggled to offer sufficiently competitive pricing for non-domestic issuers – HSBC still carved out opportunities.
Take Rabobank's first sterling bond for two years, a £400m 4.5-year non-call 3.5 green SNP that priced some 5bp through euros in October; or New York Life, which landed a £400m seven-year funding agreement-backed note that came 12bp inside US dollars.
In January, HSBC led a two-part €1.75bn Nordea covered bond that featured a rare euro covered FRN priced at least 5bp inside a fixed-rate equivalent – a clear example of HSBC’s prowess in covereds that proved a differentiating factor versus many rivals.
In other areas, HSBC gained significant market share. Its investment into Greece paid off with a fivefold increase in the number of mandates from the country’s banks, in a year when, supported by upgrades, they achieved a normalisation of their funding costs.
Perhaps the crown jewel is Alpha Bank’s €300m 7.50% perpetual non-call June 2030 AT1, the tightest ever Greek AT1 on which HSBC was a lead manager.
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